Question

discuss the principles of double entry in accounting

Answer 1

Principle of double entry in accounting is that every transaction has two equal and opposite effects. Consequently two equal and opposite entries are made in the books of accounts for every transaction.

For every expense, there is either a cash payment or increase in the money owed.

Hence for every expense, the expense account is debited and either cash (if cash is paid)or Creditor’s account is credited.

Similarly for every sales, Revenue account is credited and cash (for cash sales) or debtor’s account (for sales on credit) is debited.

When assets are purchased , asset account is debited and cash or creditor’s account is credited.

If loans are taken, cash is debited and Loan account is credited.

For loans given or investments made, Cash is credited and debtor or investment account is debited